Friends, now you have gained some familiarity with cryptocurrencies, blockchains, and exchanges. Disparities exist in terms of underlying technologies and functions. Considering their heterogeneous origin that should not surprise you.
However, that stems up a challenge for exchanges and investors too when dealing with cryptos based on different blockchains. Polkadot was brought in to solve that challenge. It’s a heterogeneous multi-chain interchange and translation architecture allowing diverse blockchains to transfer messages, including value, in a trust-free fashion; sharing their unique features while pooling their security.
What does differentiate it?
Polkadot solves the crucial challenges including the lack of scalability, interoperability, slow transaction speed, and energy consumption (gas fees) of the blockchains without tampering their fundamental ethos – decentralization. Thereby, pitching itself as the most commercially viable option not just for the crypto community but also for the general financial system to scale up their operations.
How does it do?
Unlike previous blockchain implementations that provide a single chain of varying degrees of generality, Polkadot provides a Relay Chain upon which a large number of verifiable data structures may be hosted. These data structures are referred to as “parallelized” chains or parachains.
Polkadot facilitates a networking and consensus layer that allows blockchain developers to focus on creating a state machine with unique features, such as formal verification or anonymity.
It makes no assumptions about the nature or structure of the chains in the network. Even non-blockchain systems or data structures complying with a set of criteria can act as parachains. Solving the challenges paves the way for its adoption in the mainstream financial system where millions of transactions happen every second.
Components of Polkadot Blockchain System
It serves as the core of the Polkadot system. It’s instrumental in providing the shared consensus between the parachains and facilitates cross-chain interoperability. The Relay Chain framework handles all the wallets, accounts, and the mechanism that governs the system itself.
If Relay chain is the hub of the blockchain wheel then Parachins are the spokes connecting the hub with the frame via available slots. The parachain’s team and community lease the available slot using the DOT native token. Parachains have the liberty to use their own token in their platform for transaction fees, and other economic activity pertaining to their own blockchain.
XCMP (Cross-Chain Message Passing)
Substrate-based blockchains communicate with each other through the XCMP framework. Setting up a standard logic for representing the unique assets and messages, it makes it easy for the smart contracts to connect and communicate.
Maintaining a full-node of the parachain blockchain and the Polkadot Relay Chain, collators facilitate different parachains transactions. Individual parachain incentivizes the collators with their own token or transaction fees. Polkadot doesn’t set rules about incentivization. It leaves the tasks with the parachains to provide an economic incentive to attract enough collators to their blockchain.
In the absence of a substrate framework, blockchains like Bitcoin and Ethereum, connect to Polkadot using custom bridge contracts. Parachains can host the setup of the bridge to allow for tokenized versions of the “bridged” chain to be represented on its Substrate blockchain. It ensures the compatibility of the bridge with the Polkadot ecosystem.